29 October 2013

The Universal Coverage Provisions Of Obamacare In A Nutshell

The universal coverage provisions of Obamacare mostly take effect in 2014 and between now and December is the time to sign up for health insurance through the new system if you don't have "affordable employer provided health insurance". Basically, the uninsured and self-employed are most heavily impacted by the law.

People purchasing coverage on their own will be eligible for government subsidies (through a tax credit) towards their health insurance premiums based on income. Subsidies will be provided to people with family income between 100% and 400% of the federal poverty level. The most that these families buying subsidized coverage in an exchange will pay towards a health insurance premium will range from 2.0% of income at 100% of poverty to 9.5% of income at 400% of poverty, with amounts at specific income levels specified in a table in the law. [The percentage of the premium that is subsidized is much greater for less comprehensive plans.]

Subsidies are tied to a benchmark level of coverage based on actuarial value. And, subsidies will only be available to those purchasing coverage through the exchanges, which includes people who do not have access to alternative insurance (such as Medicaid and affordable employer coverage). When an exchange determines that a person is eligible for a tax credit based on expected income, and that person enrolls in coverage, subsidies will be paid directly to insurers to lower the cost of premiums (and in some cases cost sharing). . . .

What is included in household income? How do I know what to enter for my income?

. . . Household income includes incomes of the taxpayer, spouse, and dependents. In determining eligibility for exchange subsidies, income will be based on your attestation of your expected income in 2014 and will be verified by the exchange with documentation from your most recent tax return, with consideration of reasonable changes you expect. Exchanges will calculate enrollees’ household incomes using Modified Adjusted Gross Income, or MAGI. The MAGI calculation includes such income sources as wages, salary, foreign income, interest, dividends, and Social Security. MAGI calculation does not include income from gifts, inheritance and some other income sources are partially excluded. . . .

What is the poverty level?

The federal poverty level varies by family size. In 2013, it is $11,490 for a single adult and $23,550 for a family of 4.

How does Medicaid relate to exchange subsidies?

Currently, Medicaid eligibility varies substantially by state, and is generally limited to certain categories of people (e.g., children, parents, people who are disabled, and people age 65 or older). Under health reform, states have the option to expand Medicaid eligibility to all people with incomes below 138% of the poverty level. . . . More information on state decisions regarding Medicaid expansion is available here. In other cases, people may be Medicaid-eligible based on their state’s eligibility requirements. . . .

How do premiums vary by age and health status?

Before the health law goes into effect in 2014, people buying coverage on their own generally face medical underwriting, meaning that they can be turned down for coverage or charged a higher premium based on their health status. Under the reform law, insurers are prohibited from denying coverage or charging higher premiums based on health status. Beginning in 2014, the reform law also limits the degree to which premiums may vary by age, with the premium for a 64 year old being no more than three times that of a 21 year old. This means that premiums for older people may be lower than under the status quo while premiums for younger people may be higher. Under proposed regulations by Health and Human Services (HHS), children under age 21 have slightly lower premiums and families with more than three children under the age of 21 will only be charged premiums for three children.

How do premiums vary by location?

As under the status quo, the health reform law permits premiums to vary by geographic area, reflecting the fact that the cost of living and health care expenses vary significantly by location. As shown here, average health insurance premiums vary quite a bit by state, with the lowest family premium in a state at about 17% below the national average and the highest at about 11% above the average. Premiums also vary by location within states, so the range across communities nationwide is larger than the statewide averages suggest. . . .

How do premiums vary by tobacco usage?

Currently, insurers in many states charge higher premiums (in the form of a surcharge) for enrollees who use tobacco. The health reform law allows insurers to charge people who use tobacco up to 50% more in premiums than people who do not use tobacco. Furthermore, the law specifies that exchange subsidies cannot be used to cover the portion of the premium that is due to a tobacco surcharge. . . . Under the status quo, insurers typically charge an average of 20%. Residents of states that do not permit tobacco surcharges (listed here) may arrive at a more accurate premium estimate by selecting that they do not use tobacco.

What are Bronze and Silver plans?

When purchasing subsidized exchange coverage, you can choose between four levels of coverage: Bronze, Silver, Gold, and Platinum (in order of least to most comprehensive). In general, more comprehensive plans have higher premiums, but also have lower out-of-pocket costs. Bronze level coverage is the lowest level of coverage most people are required to have under health reform; on average bronze plans cover 60 percent of enrollees’ total costs. Silver level coverage is more comprehensive, covering on average 70 percent of enrollees’ total costs. The most comprehensive plans are Gold and Platinum plans, which on average cover 80 and 90 percent of enrollees’ total costs, respectively. . . .

What is actuarial value and how does it affect premiums?

The actuarial value of a health insurance policy is the percentage of the total covered expenses that the plan covers, on average for a typical population. For example, a plan with a 70% actuarial value means that consumers would on average pay 30% of the cost of health care expenses through features like deductibles and coinsurance. The amount that each enrollee pays will vary substantially by the amount of services they use. The health reform law specifies a benchmark level of coverage for the purposes of premium subsidies using actuarial values. Premium subsidies will be tied to Silver plans, which have an actuarial value of 70%. Additional subsidies for people making between 100 and 250% of the poverty level limit cost sharing and raise the actuarial value of Silver plans. . . . Bronze plans represent the minimum level of coverage most people are required to maintain under health reform, and these plans will have higher cost sharing on average. Regardless of the level of actuarial value, insurers will have to cover a defined set of health care services and cap the total amount of cost sharing required of consumers at defined levels, but can generally otherwise vary the structure and degree of cost sharing so long as minimum actuarial value thresholds are met.

Why do the websites suck?

The Obamacare official healthcare marketplace websites suck mostly because of a key design chioce: they front load applications for Medicaid when it is inappropriate to do so and more efficient screening questions would have eliminated the need for the entire intrusive application process.